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On the 16th of August, Goldman Sachs released a report, State
of the Markets – Long and Short Risk Strategies, that
is currently making its way around the Internet. Originally
intended as a private report for its institutional clients –
hedge funds that is – a copy was leaked to the Wall Street Journal who was also the
first media outlet to break the news.

Though the international mainstream media has been largely
silent, the Goldman report has been causing quite a stir with the
online community.

The author, Alan Brazil, a key Goldman strategist who sits on the
firm’s trading desk, made three major calls about the state of
global markets.

One, that China’s growth is unsustainable, and secondly, the U.S.
economy is still languishing and small businesses that have
traditionally been the key drivers of job creation were still
fighting to stay afloat. Finally, Mr. Brazil declares that
European bank funding requirements may be substantial compared to
their sovereign capacity, estimating that close to US$1 trillion
in capital may be needed to shore up European banks.

In Mr. Brazil’s pessimistic report, he also provides various
charts and figures, detailing the numbers surrounding European
financial institutions and expounds upon the depth of the
problems in Europe, the U.S. and China. In particular, he spells
out in detail the borrowing by 77 European financial
institutions, identifying some that are highly leveraged.

Yet, such gloom and doom reports are nothing the markets have not
heard of. The financial markets have been moving erratically,
reacting sharply each time a negative data report is released – a
key sign that investors are paranoid, jittery and staring out
into an uncertain future for the world economy.

Economists and governments have also been sounding out the same
worries for quite some time.

So why is there so much chatter surrounding the latest
report by Goldman Sachs?